BOJ chief faces new challenges a year later
By Kyoko Hasegawa, AFP
March 21, 2014, 12:02 am TWN
TOKYO--Bank of Japan (BOJ) governor Haruhiko Kuroda on Thursday marked his first year in the job, with critics giving a mixed report card on his unprecedented monetary easing program rippling through the world's number three economy.
Japanese Prime Minister Shinzo Abe hand picked the former Asian Development Bank boss to help lead Tokyo's bid to jumpstart growth and reverse years of deflation which held back the once world-beating economy.
Within weeks of stepping into the job on March 20 last year, Kuroda had unleashed a vast asset-buying program — similar to the U.S. Federal Reserve's quantitative easing — which sought to pump huge amounts of money into the financial system.
The move, which sharply weakened the yen, was meant to jerk the economy out of its slumber and create lasting inflation in a country where falling prices had become the norm.
While deflation may sound good for consumers, it means people tend to put off buying in the hope of getting goods cheaper down the road, hurting producers.
The BOJ program — a cornerstone of Abe's growth blitz dubbed Abenomics — was aimed at changing that psychology.
Deflationary "expectations — a sense that prices would not increase — became entrenched," Kuroda said in a speech Wednesday.
"In order to escape such a situation, it has become necessary to pursue a policy that quickly and drastically changes people's sense that prices will not increase."
The conservative Abe, who swept to power in late 2012, had openly criticized Kuroda's predecessor Masaaki Shirakawa for not doing enough to stimulate growth, a rare public rebuke that sparked fears the BOJ's independence was under attack.
On Thursday, Kuroda gave some credit to his BOJ predecessors, saying that earlier policy has yielded results "to some extent" during 15 years of deflation. But he added that it "was not sufficient" to keep falling prices from becoming entrenched.
Tokyo's more recent efforts appear to be gaining traction. The weaker yen boosted the profitability of exporters like Toyota and Sony, and set off a 57 percent rally in the Nikkei 225 stock index in 2013, its best annual run in over four decades.
Growth led G7 nations in the first half of last year, although the pace has slowed since, while business confidence remains high and inflation appears to be taking hold.